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Nord Stream 2 gas line developer eyes 'further action' on EU law exemption

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German regulator set to reject gas directive derogation: report

Nord Stream 2 does 'not agree' with preliminary conclusion

Pipeline now expected to have to abide by amended EU law

London — The developer of the Nord Stream 2 gas pipeline said Monday it would consider its options for "further action" in its bid to be exempted from new EU rules on non-EU gas links after the German regulator's preliminary decision that it planned not to grant the project a derogation.

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The Gazprom-owned Nord Stream 2 development company in January asked the German energy regulator Bundesnetzagentur for a derogation from the EU's amended gas directive rules that came into effect in May 2019.

Such a derogation would allow the 55 Bcm a year capacity pipeline from Russia to Germany to be exempted from third-party access and unbundling rules, and requirements on transparent tariffs.

However, BNetzA on Friday sent its preliminary conclusion to the relevant parties, which -- according to German newspaper Handelsblatt -- said it planned to reject the application on the grounds that the pipeline was not completed before the directive came into effect.

"We are aware of the information shared by the German authority, BNetzA, with the participants in the procedure," a Nord Stream 2 spokesman said Monday.

"We do not agree with this conclusion. We will wait for the formal decision of the authority and of course evaluate it and further actions to preserve our rights," he said.

'Timely' final decision

In a statement to S&P Global Platts, the regulator said it had sent the "operative part" of the intended decision to the parties for comment, without confirming or denying that it planned to reject the application.

"The consultation period ends May 8 and it is intended that a decision will then be taken in a timely manner," it said.

The amended EU directive allowed waivers from the new rules for non-EU gas links provided the pipelines were completed before the changes took effect.

Nord Stream 2 argued that the project was "economically complete" before the amended EU gas directive came into effect as it had made investments worth billions of euros that "trusted the applicable legal framework at that time, long before the European Commission announced its plan to change the legal framework."

It said investments of Eur5.8 billion ($6.3 billion) had already been made irrevocably, while the pipelay in the German territorial waters was already complete at the end of 2018.

Just 160 km (99 miles) of Nord Stream 2 are left to lay in Danish waters out of the total 2,460-km length of the pipeline.

Opponents of the pipeline say until the entire link is laid it cannot be considered "complete."

Poland's PGNiG in March joined the procedure under which BNetzA would make its decision, saying Nord Stream 2 would damage security of supply and competition in the gas market in Central and Eastern Europe, and should not be allowed special legal treatment.

Significant volumes of Russian gas currently are transited to Germany via Poland, which are a key revenue generator for the country.

Nord Stream 2 rejected the Polish stance, saying the pipeline would not have any impact on CEE supply security and should legally be allowed a derogation from the amended EU Gas Directive.

Other legal challenges

Nord Stream 2 continues to look to have the amendments in the gas directive canceled.

It began arbitration proceedings in September in a bid to force the EU to annul changes to the directive, having already asked the EU's General Court in July last year to annul what it called "discriminatory" changes.